What You Need to Know
- Advisors must remind their clients to update all IRA and trust beneficiary documents.
- The Secure Act's 10-year withdrawal rule does have some exceptions.
- Slott says the 10-year rule isn't so bad, because most young beneficiaries take out the money relatively quickly anyway.
Advisors can be a hero to their clients in one big way: Remind them to update designated beneficiaries for their IRAs or trusts.
As Ed Slott said in his session at the American Institute of CPAs conference on Tuesday, not having updated DBs “is where all the problems come from” — particularly in light of changes under the Setting Every Community Up for Retirement Enhancement Act.
Beneficiaries need to be checked after births, deaths, marriages and divorces. Slott cited the tag line from the film “The Sixth Sense” — “I see dead people” — because that’s who he sees a lot of on beneficiary forms.
In the session, he outlined post-death and post-Secure Act guidelines that advisors should be aware of when dealing with beneficiary trusts and IRAs.
A key difference the Secure Act brought in was eliminating the stretch IRA (for the most part) and placing a 10-year limit on IRA withdrawals for beneficiaries. For those who died in 2019 or before, their DBs would be eligible for a stretch IRA, while the beneficiaries of those who died afterward would not.